You are considering a new product launch. The project will cost $720,000, have a 4-year life,...

You are considering a new product launch. The project will cost $720,000, have a 4-year life, and have zero salvage value; depreciation is straight-line to zero. Sales are projected at 380 units per year; price per unit will be $17,400; variable cost per unit will be $14,100; and fixed costs will be $680,000 per year. The required return on the project is 15% and the tax rate is 21%. Based on your experience, you think the unit sales, variable cost, and fixed cost projections are probably accurate within plus or minus 10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios?

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jeff jeffy answered 2 years ago

You are considering a new product launch. The project will cost $760,000, have a 4-year life,...

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You are considering a new product launch. The project will cost $760,000, have a 4-year life,...

You are considering a new product launch. The project will cost $760,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 450 units per year; price per unit will be $17,800, variable cost per unit will be $14,500, and fixed costs will be $740,000 per year. The required return on the project is 13 percent, and the relevant tax rate is 24 percent. a. The unit sales, variable cost, and...

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You are considering a new product launch. The project will cost $720,000, have a 4-year life,...

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